No matter what stage of self-employment you may be in, thinking about how to make your investments last in retirement should be a top priority. If you are ahead of the game and already have a retirement fund in place, now’s the time to consider how you can maximize it. A key way to optimize the return on your investments is by using an income investing approach. By collecting cash flow from dividends from stocks, interest from various types of bonds, and distributions that come from a variety of investments, you can create a solid portfolio.
Each stage of self-employment comes with a different list of “to-do’s” when it comes to retirement planning. In order to keep yourself on track, try to follow these tips.
Stage 1: Early Stage of Self-Employment
The early stage of self-employment may be the most overwhelming, especially if you’ve left a traditional career in the workforce to start your own business or become self-employed. Right now, retirement is probably the last thing on your priority list, but there’s no better time to start considering your options.
Don’t become dissuaded by contribution limits. Even if you can’t put in the cap amount on a retirement account, that doesn’t mean you should forego saving altogether. Instead, focus on saving what you can, when you can, especially in the early stages.
Have money automatically withdrawn into your retirement account. Out of sight, out of mind, and then you don’t have to worry about it.
Look into an individual 401(k). This is only an option if you have no employees. This is also the perfect account if your spouse hopes to contribute too. If you choose a Roth plan, you can also enjoy tax-free withdrawals once you hit a certain age, which are typically helpful when you’re self-employed.
Consider stocks. Invest in your own company, but also consider other businesses in your industry, particularly if your own proprietorship has a hard year. You’ll diversify your portfolio and your assets.
Talk to your financial advisor about rolling over previous savings. Depending on the amount of savings you have already accumulated in your retirement accounts, rolling your accounts over into a new, self-employed retirement plan might be more complex than you anticipated. Speak with your financial advisor about the best route to take, whether that includes investing the money or simply adding it to your current plan.